Investment firms including companies, insurance businesses, investment professionals, and or other individuals make investments by purchasing or selling particular securities. As used herein, a security is an investment instrument issued in the market place. Also as used herein, a purchase lot is an investment in a security or securities. A portfolio may include investments in a security or various securities, and the composition of the portfolio investments may change over time as securities are purchased and sold. Accounting systems are utilized to track the securities within a portfolio.
A financial entity, as for example an insurance or investment company may have to account for investments under multiple sets of accounting principles, depending on the purpose of the financial reporting. Each set of accounting principles are defined by a mandated collection of specific regulatory business rules. These rules often differ depending on the regulatory objective. A financial entity may have to account for investments under Generally Accepted Accounting Principles (GAAP), which is the standard for corporate reporting purposes, and used for financial statements and reports to shareholders and the Securities and Exchange Commission (SEC). Generally, these principles reflect the desire to present a meaningful but conservative financial picture to shareholders. A financial entity may have to account for investments under Statutory Accounting Principles (SAP), also known as Acquisition Base or Investment Accounting. SAP are mandated by the National Association of Insurance Commissioners (NAIC), the insurance industries regulating body, which are the standards that must be followed by insurance companies. Generally, the purpose is to ensure enough reserves are kept on the books to meet possible claim payments. A financial entity may have to account for investments under Tax, for Federal Tax Regulations, which are the IRS rules and guidelines for declaring income. Generally, the purpose is to book earnings as soon as is feasible and limit deductions, thereby maximizing taxable income.
Financial entities (e.g., investment firms, insurance companies, etc.) typically have to account and report for investments under multiple accounting rules. As a result, financial entities may be required to maintain separate book-of-records for portfolio investments, and for the investments within a portfolio, for each accounting rule applied to a portfolio. The accounting systems may typically not share data or provide a common access point or user interface. For some securities, the systems do not provide for an accurate accounting with immediate calculated updates for investments when particular events occur during the life of the investment or multiple accounting methods. If in the life of an investment, a financial event needs to be applied early in the life of the investment, then all calculation and reporting after the event needs to be deleted and the calculations renewed from that added event going forward. Financial entities may also utilize separate systems to calculate, balance, document, and report information pertinent to a portfolio or the investments within. Due to these conventional restraints, many man-hours are required to process an investment as events in the life of the investment take place often requiring redundant calculations of cash flow, yield, and amortization of the security for different accounting methodologies over various systems. This may result in inaccurate or inconsistent investment ledgers and reporting.
Financial entities are also connected across public networks via, for example the Internet or wirelessly, to trading systems, data feeds, inventory locations (e.g. banks), regulatory systems, and the like. A financial entity may connect and obtain investment information from a data system over a network during a financial transaction and then input the information into a separate localized accounting system. Manual creation of the investment, as obtained, for example, from private placement documents over a data feed, is typically constructed by a user for the accounting system. After the accounting for the investment is conducted then the information pertaining to the investment for reporting, such as recording financial values to the investment ledger is made available from an accounting system to some other system before the information can be reported to a client or regulatory body. Inventory and cash maintenance may be conducted by the owner or custodian of the book-of-records outside other accounting systems utilized.
What is needed is an integrated and flexible system to manage investments, including portfolio investments and the securities within a portfolio, over multiple investment groups and accounting methodologies, including for example GAAP, SAP, Tax, and Trade. A need also exists for the system to manage an investment from the time the investment is entered (e.g. purchased or exchanged) into the system to the time the investment is reported out from the system. A need further exists such that any event occurring during the life of an investment is accounted for immediately and across the multiple accounting methodologies for a user to review and for reporting purposes. A need further exists, such that certain users may be able to update, remove, or replace events during the life of an investment and for a system to react in substantial real time for an event by calculating cash flow, yield, and amortization for an accurate reporting as of the date the event was manipulated by the user. What is also needed is inventory reconciliation and management within the same system that is updated as events occur for each investment.